RESIDENTIAL STATUS OF INDIVIDUAL- SIMPLIFIED

RESIDENTIAL STATUS

FOR

INDIVIDUAL

Income Tax Act, 1961 divides Individual into three categories depending upon their Residential status in India (this Residential status is different from that mentioned in FEMA Act). The three categories are:

1. RESIDENT AND ORDINARILY RESIDENT

2. RESIDENT BUT NOT ORDINARILY RESIDENT

3. NON-RESIDENT

The above three categories determine which part of the Income earned in India and that of Foreign is taxable in India. Below is the simplified Blocks containing rules for each category:

RESIDENT AND ORDINARY RESIDENT ·      For Being Resident and Ordinarily resident both the below mentioned conditions is to be followed: 1.    Any one of the below mentioned conditions is to be followed: a)    Stay in India for 182 days or more Or b)   Stay in India for 60 days in the year and in previous 4 years stay a total of 365 days (not applicable for Individual going out of India for Employment and for Indian citizen or person of Indian Citizen coming to India for a Visit) And 2.    Should not be Non Resident for a period of 9 out of previous 10 years and should have stayed more than 729 days in previous 7 years.

RESIDENT BUT NOT ORDINARILY RESIDENT ·           For Being Resident But Not Ordinarily resident both the below mentioned conditions is to be followed: 1.    Any one of the below mentioned conditions is to be followed: a)    Stay in India for 182 days or more Or b)   Stay in India for 60 days in the year and in previous 4 years stay a total of 365 days (not applicable for Individual going out of India for Employment and for Indian citizen or person of Indian Citizen coming to India for a Visit) And 2.    Should not follow either one or both the conditions given below: a)    Should not be Non Resident for a period of 9 out of previous 10 years b)    Should have stayed more than 729 days in previous 7 years.
	NON RESIDENT ·         To be Non-Resident the Individual should not follow both of the condition given below: 1.       Stay in India for 182 days or more 2.       Stay in India for 60 days in the year and in previous 4 years stay a total of 365 days (not applicable for Individual going out of India for Employment and for Indian citizen or person of Indian Citizen coming to India for a Visit)

RESIDENTIAL STATUS AND TAXABILITY

INCOME	RESIDENT AND ORDINARILY RESIDENT	RESIDENT BUT NOT ORDINARILY RESIDENT	NON-RESIDENT
Received or is deemed to be received in India	TAXABLE IN INDIA	TAXABLE IN INDIA	TAXABLE IN INDIA
Accrues or arises or is deemed to accrue or arise in India	TAXABLE IN INDIA	TAXABLE IN INDIA	TAXABLE IN INDIA
Accrues or arises outside India	TAXABLE IN INDIA	TAXABLE IN INDIA (Only if Business Control or Profession set up in India)	NOT TAXABLE

RELEVANT PORTION OF THE ACT

As per Section 6(1) of the Income Tax Act, 1961:

 An individual is said to be resident in India in any previous year, if he—

(a)  is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or

(c)  having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

Exceptions:

In the case of an individual,—

(a)  being a citizen of India, who leaves India in any previous year [as a member of the crew of an Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted ;

(b)  being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days" had been substituted.

As per Section 6(6) of the Income Tax Act, 1961:

A person is said to be "not ordinarily resident" in India in any previous year if such person is—

(a)  an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or

 As per Section 5(1) of Income Tax Act, 1961

 Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which—

(a)  is received or is deemed to be received in India in such year by or on behalf of such person ; or

(b)  accrues or arises or is deemed to accrue or arise to him in India during such year ; or

(c)  accrues or arises to him outside India during such year :

Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—

(a)  is received or is deemed to be received in India in such year by or on behalf of such person ; or

(b)  accrues or arises or is deemed to accrue or arise to him in India during such year.

Explanation 1.—Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.

Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India.